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Data explosion continues at MTN

MTN has reported that, during 2012, data revenue across the Group increased by 58.5%, and by 37.6% in South Africa, with 33% growth in data revenue from consumers.

In its annual results for the year ending December 2012, released
this morning, MTN reported that data revenue had increased by 37.6% in South
Africa, and 58,5% across the group – confirming that the mobile data explosion
continues across Africa. The growth among consumers, i.e. excluding MTN
Business, was 33%.

Total data revenue was R14,574-billion. Of this, R6,4-billion was generated in South Africa.

According to Chief Financial Office Nazir Patel, data will
continue to be the core of MTN’s growth strategy.

The Group’s overall subscriber base increased
by 15,1% to 189,3 million in 2012, while revenue increased by 10,9% to R135-billion.
EBITDA (profit before tax and depreciation) increased by 7% to R58,5-billion.
The margin remains 42,9%. The Group reported R30-billion in capital
expenditure, with R6,416-billion spent in South Africa.

MTN South Africa’s subscriber
base grew by 15,4% to 25,4 million, driven primarily by 15% growth in the
pre-paid segment to 20,9 million. This was attributed to competitive offerings
and in particular the MTN Mahala and MTN Zone offerings. The post-paid (contract)
subscriber base increased by 17,3% to 4,5 million. MTN now claims market
share of 37,7%.

Data revenue increased by
37,6% to R6,4 billion and contributed 15,5% to total revenue (excluding SMS).
Data revenue was boosted by the increase in data users to 13,4 million from
10,9 million, and 5,5 million smartphones on the network.

Airtime revenue grew by
4,8% to R21,1 billion largely due to subscriber growth. During the year, MTN
South Africa sold 6,7 million prepaid phones and 1,3 million post-paid phones.

Blended ARPU declined by
9% to R122 from R134 in December 2011 – partly due to declining call and data
charges, but also probably due to the growth in
lower-ARPU pre-paid customers.

The following overview
was provided by MTN

We are pleased to
announce MTN’s results for the year ended 31 December 2012, which
notwithstanding significant challenges, reflect solid progress in growing
subscribers, revenue and EBITDA. The year was characterised by the continued
global economic slowdown, increasingly competitive mobile markets as well as
regulatory and political challenges. The new MTN Group structure, put in place
in early 2012, which sees the business split into key pillars, namely South
Africa, Nigeria and the ‘Large and Small Opco Cluster’, has enabled more
focused management and better execution of strategies across the various
business units.

Over the past year,
subscribers increased 15,1% to 189,3 million, a strong result in the face of
the ongoing subscriber registration requirements and network challenges in key
markets. The low levels of mobile penetration across our markets should support
continued strong subscriber growth.

Revenue for the year
increased 10,9% (**8,5%), with the majority of our operations delivering strong
organic growth. Organic revenue growth for all operations excluding Nigeria
increased **12,3%. Despite a challenging period for Nigeria (revenue **-0,8%)
following significant tariff declines amid heightened competition, the last
quarter of 2012 has delivered consistent month-on-month growth, highlighting
the strong underlying demand which we expect to continue in 2013.

Group EBITDA increased
8,2% to ***R57 978 million with an EBITDA margin of ***42,9%.

Encouragingly we saw margin improvement across the majority of our Large Opco
Cluster with organic growth in EBITDA of **20,7%.

Nigeria negatively
impacted the Group’s overall margin performance but has enjoyed an improvement
in the fourth quarter which we expect to continue during 2013.

We delivered on our commitment
to shareholders and customers to accelerate our network rollout, with
7 168 (3 685 2G and 3 483 3G) sites delivered during the year, a
significant improvement on the 4 126 sites completed in 2011. In an effort
to accelerate our 2013 capex investment programme, the reported capex for 2012
includes some equipment delivered for part of the 2013 rollout. We believe this
will be a key factor in securing our continued growth over the medium term.

Prospects

After a challenging 2012,
the Group is well positioned for 2013. We expect to deliver continued organic
growth in both revenue and EBITDA and anticipate reaching the milestone of 200
million subscribers by mid-year. The recovery in the performance of our key
Nigerian operation is expected to continue throughout 2013. This together with
a lower tax rate and the benefits of the substantial network investment made in
2012 across all operations, which is to be continued in 2013, is likely to
support growth in reported earnings in 2013. We continue to explore value
accretive M&A activities.

Any forward looking
information contained in this announcement has not been reviewed or reported on
by the Company’s external auditors.

DIVIDEND POLICY

The Group has reviewed
the current dividend policy which has been based on a payout ratio.

In light of
the ongoing exchange rate volatility and the impact of this on reported
earnings, MTN has taken the decision to move to a dividend policy of absolute
growth for the coming three-year period through to the end of 2015. Whilst we
aim to grow dividends in a range of 5% to 15%, these payments remain at the
full discretion of the board of directors of MTN (“the MTN Board”) and will be
considered by taking account of the growth needs of the business and the
associated free cash generation. For the 2012 financial year, our final
dividend of 503cps implies growth in the full year dividend for 2012 of 10%.

CHAIRMAN

Shareholders are advised
that Mr Cyril Ramaphosa, a non-executive director and Chairman of MTN will be
retiring at the forthcoming Annual General Meeting of shareholders on 28 May
2013.

Mr Ramaphosa was
appointed to the MTN Board on 1 October 2001 and has been serving as Chairman
of the MTN Board since 2002. He is also Chairman of the Nominations Committee
as well as a member of the Remuneration and Human Resources Committee.

Following a review of his
business related commitments, which include directorship of MTN, Mr Ramaphosa
has now informed MTN that he wishes to relinquish his position as non-executive
director and Chairman of MTN and will therefore not avail himself for
re-election at the Annual General Meeting to be held on 28 May 2013.

Mr Alan van Biljon, Lead
Independent Director will, in consultation with the Nominations Committee,
undertake the process of identifying a suitable successor to Mr Ramaphosa.

The MTN Board thanked
Cyril for his selfless and visionary leadership as well as his immeasurable
contribution that has made MTN to be one of Africa’s biggest success stories.

HOFFMANN COMMISSION

As previously
communicated the Hoffman Commission reported its findings and recommendations
to the MTN Boardon 1 February 2013. In reaching these findings, following a
critical examination of the evidence, the Hoffmann Commission found that
Turkcell’s allegations are “a fabric of lies, distortions and inventions”. The
full report of the Hoffman Commission was released by the MTN Board, and is
available in the investors’ section of the company’s website at www.mtn.com

MTN continues to
vigorously defend the US Proceedings, and expects that the US Court will decide
its motion to dismiss such proceedings in the second half of 2013.

SANCTIONS

MTN continues to work
closely with all the relevant authorities to manage US and EU sanctions against
Iran and Syria. MTN continues to retain international legal advisors to assist
the Group in remaining compliant with all applicable sanctions.

Driving sustainable
growth

We will continue to
refine our traditional product offering as well as actively develop new
opportunities to ensure the delivery of a bold new Digital World to our
customers.

VOICE

Over the past year,
billed traffic volumes increased 24,6% while voice revenue grew **4,0% on a
constant currency basis as tariffs continued to decline. Voice revenues now
account for 63,0% of total revenue, down from 65,2% in the prior year due to
the relative growth of other revenue streams. With Group weighted mobile
penetration just over 70%, and people penetration below 60%, we still expect to
see continued growth in voice revenue over the medium term. In addition, the
Group will also benefit from the expected improvements in voice revenue growth
in Nigeria in 2013.

DATA AND RELATED SERVICES

Growth in our data and
related service revenue remains a key focus for the Group, with this expected
to be an important revenue driver as the rate of increase in voice penetration
slows and competition intensifies.

While South Africa remains the
main driver of data revenue, contributing 43,9% of the total, the *111,6%
(247,8%) local currency (“LC”) growth in Nigeria highlights the growing
contribution from data across operations. MTN Mobile Money has also started to
gain traction and we expect to see a much improved contribution in 2013.

ICT EVOLUTION

Towards the end of 2012,
we concluded the integration of the South African MTN Business function into
MTN South Africa. This will allow for a more holistic solution offering to our
clients, designed to improve efficiencies and deliver consistent quality. We
continue to focus on integrating our broader ICT business across all markets
and our ongoing infrastructure investment will allow us to leverage our key
products and services across the MTN footprint.

The following financial
review was supplied by MTN

REVENUE

Group revenues increased
10,9% to R135 112 million, supported by solid organic growth in South Africa (+7,1%)
and although Nigeria had a difficult year **(-0,8%) a number of operations
continue to outperform with strong** organic revenue growth: Iran (+26,1%),
Ghana (+21,3%), Uganda (+16,2%), Sudan (+28,3%) and Ivory Coast (+17,0%). Group
data revenue increased *58,5% and was an important driver of total revenue
growth. The weakness in the average rand exchange rate during the year also
supported the improvement in reported revenue.

EBITDA

Group EBITDA increased
7,0% to R58 564 million which includes R586,6 million related to the
profit on tower deals. EBITDA excluding the profit on tower sales was
R57 978 million, with an EBITDA margin of 42,9%. The growth in EBITDA was
supported by solid organic growth in South Africa (+6,5%) and particularly
strong results from Iran, Ghana, Uganda, Sudan and Ivory Coast where **organic
EBITDA growth was 30,8%, 22,6%, 22,4%, 58,5% and 13,2% respectively. After a
challenging year, Nigeria reported a decline in EBITDA of 6,2%. A number of
once-off costs resulted in an approximate R1,0 billion reduction in head office
EBITDA. The key components of this cost relate to the Turkcell lawsuit and the
Hoffmann Commission; Iran tax-related charges and forex costs; and costs
related to the new shared services initiative. The combined impact of these on
the EBITDA margin was approximately 0,7%.

DEPRECIATION AND
AMORTISATION

Group depreciation
increased by 11,8% to R14 860 million and amortisation increased by 10,3%
to R2 386 million, mainly due to the increased investment in property, plant
and equipment in South Africa and Nigeria.

NET FINANCE COSTS

Net finance costs were
R4 157 million, an increase of R2 575 million on the previous year,
due to the effects of net forex and functional currency losses. The weakness in
the Syrian pound, which declined 60% over the year, resulted in a loss of
R1 507 million related to the dividend payable, while the dividend due
from Iran resulted in a loss of R1 191 million with a further R243 million
related to the revaluation of Iran tax balances following the decline in the
Iranian rial in the last quarter. Iran incurred additional forex losses of R567
million, while vendor financing and current accounts in Sudan resulted in a
forex loss of R373 million.

TAXATION

The Group’s taxation
charge decreased by 6,8% to R12 913 million and the effective tax rate
decreased 1,9 percentage points to 34,9%. The lower tax charge and effective
tax rate was mainly due to a deferred tax credit movement and the
discontinuance of STC in South Africa during the year.

Cash inflows from
operating activities remained flat principally due to the 27,3% increase in
dividends paid to equity holders and 51,9% increase in taxation paid offsetting
the 15% increase in cash generated by operations. Expenditure on property,
plant and equipment (excluding software) of approximately R22 billion was 52,9%
higher, which contributed significantly to the cash outflow in investing
activities. Cash outflows on financing activities were mainly
attributable to MTN Holdings purchasing 16 million shares in the MTN Group on
the open market for R2,1 billion.

CAPITAL EXPENDITURE

Capex increased by 69,9%
to R30 101 million as we focused on capital investment across the Group.
The pre-ordering of capex equipment for the 2013 rollout resulted in a R2,0
billion year-on-year increase in inventory and ‘work in progress’. The
weakening in the rand increased capex by **R1 379 million. If there had
been no change in currency rates during the year, capex would have been
**R28 722 million.

ASSETS AND
LIABILITIES

Assets and liabilities
were negatively impacted by the depreciation in the Iranian rial, Syrian pound
and Sudanese pound. Property, plant and equipment increased 8,2% due to the higher
capital expenditure in the second half of 2012. Current assets decreased 8,3%
mainly because of decreases in cash balances. Interest-bearing liabilities have
remained substantially in line with the previous year.

CASH BALANCE

Net cash decreased by
53,0% to R5 519 million from R11 817 million, largely a result of
increased dividend payments, capital expenditure and share buy-backs. At year
end, the MTN Group reported net cash of approximately R7 034 million
in Iran and Syria.

The following operational
review is supplied by MTN:

SOUTH AFRICA

·
EBITDA (excluding MTN Business) margin was stable at 35,2%

·
Data revenue 37,6% higher

·
Subscriber market share increased to 37,7%

MTN South Africa recorded
an impressive operational performance considering the step-up in competitive
activity in the market. The total subscriber base grew by 15,4% to 25,4
million, driven primarily by 15% growth in the pre-paid segment to 20,9
million. This was largely due to competitive offerings and in particular the
MTN Mahala and MTN Zone offerings as well as data services. The post-paid
subscriber base increased by 17,3% to 4,5 million. This growth in
post-paid continues to be driven by competitive data offerings and the success
of hybrid and telemetry packages. Net connections for the year totaled 3,4
million compared to 3,2 million in 2011, and had the effect of increasing
market share to 37,7%.

Total revenue grew by
7,1% to R41,4 billion from R38,6 billion in the prior year. This was primarily
drivenby solid growth in data (excluding SMS) and airtime revenue, supported by
subscriber growth. Data revenue increased by 37,6% to R6,4 billion and
contributed 15,5% to total revenue (excluding SMS). Data revenue was boosted by
the increase in data users to 13,4 million from 10,9 million, and 5,5 million
smartphones on the network.

Airtime revenue grew by
4,8% to R21,1 billion largely due to subscriber growth. During the year, MTN
South Africa sold 6,7 million prepaid phones and 1,3 million post-paid phones.

Blended ARPU declined by 9% to R122 from R134 in December 2011. EBITDA
increased by 6,5% to R14,5 billion. The reported EBITDA margin declined by 0,2
percentage points, primarily due to the 7,5% increase in operating costs.
Operating costs were impacted by the 16,1% increase in handsets and other
accessory costs as a result of greater spend on high-end handsets. This was
partly mitigated by promotions increasing on-network traffic to 67,1% compared
to 61,9% in the prior year. This result was impacted by the inclusion of
Business Solutions for two months.

Capex for the period
amounted to R6 416 million. MTN continued to modernise its network and
focus on 3G coverage and capacity. Fibre rollout remains a priority to support
the higher network volumes. The qualification criteria for Long Term Evolution
(LTE) spectrum is still being finalised by the Minister of Communications
who has embarked on a process to address the high demand frequency bands in
South Africa.

NIGERIA

·
Full-year EBITDA margin of 58,3%

·
Consistent month on month revenue growth from October 2012

·
Acceleration of network build-out to support revenue growth

MTN Nigeria experienced a
challenging first half of 2012 mainly due to aggressive price competition
driven by bonuses on recharge, freebies and other promotional activities.
Following significant capital expenditure, the network quality improved during
the second half of 2012. Together with new value propositions, this enabled MTN
Nigeria to regain some market share. The total subscriber base increased by
13.9% to 47,4 million and market share was down 2,5% to 47,5% for the year.

Total revenue in local
currency (naira) in 2012 was flat compared to the prior year notwithstanding
the increase in subscribers.

Reported revenue in rand was positively impacted
by the relatively weak rand rate against the naira, with the average naira/rand
exchange rate 10.66% stronger over the year. Revenue in rand grew by 10.9% to
R38,7 billion compared to R34,8 billion in 2011.

The EBITDA margin
declined by 3,4 percentage points to 58,3%, mainly because of flat revenue and
higher operating costs. The operating environment was characterised by the
decline in the effective tariff, the increase in promotional free minutes and
an increase in interconnect costs, driven by an increase in off-network
traffic.

Data revenue (excluding
SMS) increased by *111,6% (247,8%) in naira supported by the availability of
affordable data-enabled devices (both GPRS and 3G). During the year a total of
3,8 million smartphones and 201k dongles were active on the network. This was
achieved through partnerships with independent device resellers, free SIM
cards, and data bundle offers, as well as the refitting of service centres to
make them device oriented.

The regulator imposed
fines during the year on the four GSM operators for poor quality of service.
These fines were subsequently paid and more realistic key performance
indicators were negotiated with the regulator. There remains no clarity on the
deadline for SIM registration although the regulator is continuing with the
harmonisation process to institute a central database for registration. The
percentage of subscribers whose personal details have been registered by
MTN by year end was 84%.

OTHER KEY
OPERATIONS

·
Organic revenue growth of **16,6%

·
EBITDA margin excluding tower profits increased to 36,9% from 34,9%

·
Exceptional growth in data

Iranreported a good result in
a challenging environment. Total revenue grew by 26,2% (LC), driven primarily
by airtime and subscription revenues, which grew by 24,1%, while SMS revenue
increased by 30,4% (LC). Reported revenue in rand was negatively impacted by
the relative depreciation of the rial against the rand in the fourth quarter.
Data revenue (excluding SMS) increased by *103,6% (267,2%), driven mainly by
increased GPRS utilisation as network quality improved, as well as by lower
data prices. MTN Irancell recorded an increase in EBITDA margin as a result of
efficiencies and effective cost controls, which largely offset the effect of
the high inflationary environment. The rollout of some projects has been slower
than anticipated because of delayed equipment delivery and the impact of
sanctions on the importation of certain equipment.

Ghanacontinues to do well
despite heightened competition. Ghana now has six operators following the
launch of a new competitor in the second quarter of the year. This congested
marketplace, together with aggressive offerings from two of the incumbent
operators, resulted in a decline of 1,9 percentage points in subscriber market
share to 50,5%. Despite this, revenues increased 21,5% (LC) and EBITDA rose by
23,0% (LC) excluding the profit on sale related to the tower transaction. Data
(excluding SMS) revenue increased by 95,0% (LC) thanks to data-related
promotions supported by affordable handsets, lower data prices and appealing
bundle packages. Significant growth in airtime sales via MTN Mobile Money
supported a reduction in dealer commission costs. MTN Ghana’s EBITDA margin
reduced slightly due to rent and utilities costs from the leasing of towers.

Cameroon is well placed for
growth in 2013 and reported a solid set of results in 2012 despite being
impacted by a number of once-off adjustments. The business is well positioned
to deliver a strong performance in 2013 despite the sluggish economic outlook.
The company achieved the best level of network build-out to date and this has
enabled continued improvement in network quality metrics. Data revenues
increased 25,4% (LC) with handset data revenues the key driver of this while
ICT revenue was stable. With improvements in ICT revenue and the MTN Mobile
Money business, we expect another strong performance in data in 2013.

Ugandadelivered strong results
in a competitive market with local currency EBITDA up 22,0% excluding the
profit on the sale of towers. Data revenue increased *86,4% (855,0%)(LC)
supported by a strong performance in MTN Mobile Money. With 78% of our
subscriber base registered and more than 2 million transactions each month, MTN
Mobile Money now contributes meaningfully to Uganda’s revenue. We concluded the
tower transaction with ATC during 2012, which saw the business sell 962 towers
to ATC. This transaction will have a negative impact on reported margins in
2013 given the higher associated lease costs.

Ivory Coastcountered increased
competition given the aggressive pricing from the other operators. Reported
subscriber numbers were negatively impacted by approximately 400 000 disconnections
as a result of the conclusion of the subscriber registration period. Despite
this, the business delivered a good operational result with EBITDA up 15% (LC).
The business reported a substantial increase in handset data revenues with ICT
revenues and MTN Mobile Money up strongly.

Syriamaintained operations in
a challenging environment. During the year, revenue growth was limited to 2,9%
with this primarily driven by data revenue (excluding SMS) which increased by
47,3% (LC). Most of the revenue growth occurred in the first seven months of
the year. As the crisis in that country deepened, economic activity in a number
of towns and commercial centres was disrupted, with coverage and subsequently
revenue affected. Reported EBITDA declined by 26,8% largely as a result of the
depreciation of the currency. Revenue and EBITDA are expected to remain under
pressure in the months ahead in the absence of a resolution of the crisis.

Sudanreported an encouraging
turnaround as the improvements evidenced in 2011 continued. The business
reported revenue growth of 28% (LC) with EBITDA up just over 60% (LC). While
off a low base, data revenues increased by 722,1% (LC) and remain a focus for
the business in 2013. High inflation and increased taxes remain a challenge
and are negatively impacting disposable income. During 2012, MTN Sudan recorded
a 3,9 percentage point improvement in market share and the year ahead will see
a continued focus on strengthening our position and further gains in market
share.